Basic Financial Considerations for College Applicants
If you or someone in your network is a parent of one of the over 18 million students headed off to begin or continue their undergraduate studies this fall, you may have a heightened interest in an important aspect that often arises during this time of year: financial considerations for college students.
With tuition more than doubling since the 1960s, it’s essential to plan wisely to ensure a smooth transition in and through the college years. Here are some practical tips and considerations that will help:
- Budgeting basics: Encourage your student to create a budget, outlining their expenses (i.e., tuition, books, housing, food, and miscellaneous costs) and adjusting it each year as necessary. We are big fans of the book How To Money as an introduction for teens to begin exploring financial responsibility.
- Educate about responsible borrowing: Knowing the implications of student loans and the importance of borrowing responsibly is crucial. Talk honestly and regularly with your student about the long-term impact of student loan debt on financial goals post-graduation, as well as their expected obligations which may be unique to your family.
- Explore or revisit financial aid: Securing financial aid isn’t a one-time affair — it’s an ongoing process. Every fall, revisit your student’s financial assistance, from scholarships and grants to student loans. Keep in mind the Free Application for Federal Student Aid (FAFSA) must be completed annually to ensure continued support throughout college. Institutions also offer their own list of grants that are awarded each year.
- Understand your tax-advantaged savings plans: If you have a 529 plan or Coverdell Education Savings Account (ESA), ensure you and your student know how to use it. These accounts offer tax benefits and can help offset the burden of tuition and related costs, but distributions must be used for qualifying expenses.
- Encourage part-time work: While focusing on academics is essential, encourage your student to consider part-time work, work study, or internships to supplement their income and gain work experience. This will also help students begin to understand work-life balance.
- Take advantage of student discounts and resources: Apple, Verizon, Sam’s Club, and Amazon Prime are just a few of the companies that offer education discounts. You can find a comprehensive list here to help your student maximize these opportunities. Additionally, encourage your student to utilize campus resources such as career services and financial literacy programs.
- Plan for post-graduation repayment: Whether graduation is one or four years away, help your student develop a plan for post-graduation loan repayment, considering factors such as income-driven repayment plans, loan consolidation, and strategies for accelerating debt repayment. If you student is able, consider paying directly toward principal, even if in small amounts, while still enrolled to get a head start.
- Prepare for emergencies: Establishing an emergency fund is crucial to prepare for unexpected expenses that may arise during the college years. Additionally, consider creating essential legal documents such as a power of attorney, a living will, and a HIPAA authorization for your young adult as guardians will lose many related rights once the child reaches the age of majority which is 18 in many states.
We hope these tips provide helpful insights; please feel free to share this email with anyone who may benefit from this information. As always, we are here to offer personalized guidance and support to help you make sense of this formative time in your student’s life.